Performance review
2021 performance is in line with our expectations
The company announced 2021 results: revenue of 7.252 billion yuan, an increase of 14.22% over the same period last year; net profit of 2.078 billion yuan, an increase of 17.13% over the same period last year, corresponding to 0.43 yuan per share, which is in line with our expectations.
The increase in sales volume and the reduction of VAT led to the growth of income scale. 1) the settlement volume of the sewage treatment sector was + 14.22% to 1.486 billion cubic meters compared with the same period last year, and the value-added tax rate on income from superimposed sewage treatment services was lowered from 13% to 6%. Jointly promote the revenue of the sewage treatment services sector from + 18.84% to 4.18 billion yuan; 2) the water supply sector sells water from + 9% to 621 million cubic meters compared with the same period last year, driving business income from + 9.54% to 1.697 billion yuan.
Profitability is under pressure, during which the expense rate increases and the cash flow is abundant. The company's comprehensive gross profit margin in 2021 was from-2.27ppt to 41.37% compared with the same period last year, mainly due to the increase in the establishment of sewage projects in newly established companies and the acquisition of water investment groups, and did not enjoy the preferential social security policy for the same period last year, resulting in the gross profit margin of the sewage treatment sector from-3.71ppt to 47.39%. During the period, the expense rate is from + 1.23ppt to 18.05%, of which the sales expense rate is from + 0.33ppt to 2.16% compared with the same period last year, mainly due to the increase in periodic water meter replacement in water supply enterprises, and the management expense rate is from + 0.92ppt to 15.29% compared with the same period last year. It is mainly due to the improvement base period of the social security preferential policy of the epidemic in 2020, and there are fewer maintenance projects affected by the epidemic, which can not be settled in time. The net cash flow of the company's operating activities in 2021 was + 18.83% to 2.735 billion yuan compared with the same period last year.
Trend of development
The steady development of the main water industry has promoted the continuous improvement of the performance. Phase II of Beibei Honggong Waterworks was completed and put into operation in 2021, completed the acquisition of Niutouyan and other waterworks, realized full coverage of sewage treatment projects in all districts and counties in the city, successfully expanded the rural water supply market in Yubei District and Jiangbei District, expanded new business areas such as sub-quality water supply and pipe network operation and maintenance, and accelerated the strategic layout of areas outside Chongqing. We believe that the company is steadily expanding the local market and actively expanding its layout, and the main business is expected to grow steadily.
Actively promote digitization, operational efficiency is expected to continue to improve. The company actively promotes digital transformation, speeds up the construction of intelligent water affairs, builds a professional big data cloud platform, realizes the cloud of more than 20 enterprises belonging to the company, and provides cloud services for the municipal water supply and water saving service platform. To promote the construction of intelligent waterworks and sewage treatment plants in an orderly manner, we believe that the company's management and operation efficiency is expected to be further improved, and better performance may be ushered in in terms of cost control and profitability optimization.
Profit forecast and valuation
We maintain a net profit of 2.259 billion yuan for 2022e and introduce a net profit of 2.476 billion yuan for 2023e. The current share price corresponds to the price-to-earnings ratio of 13.6 times earnings for 2022max. Maintain the outperform industry rating, taking into account that the company is actively promoting digital transformation to improve the quality of development, raising the target price by 23% to 8 yuan, corresponding to 17.0Compact 15.4 times 2022amp 2023 price-to-earnings ratio, which has 25% upside space compared to the current stock price.
Risk.
The sewage disposal fee is downward; the project is not as expected; the risk of interest rate fluctuation.